By Dominique de Kevelioc, de Bailleul
Beacon Contributing Writer
If you missed the candid opening statement Wednesday by William K. Black before the Financial Services Committee, you’re in for a treat.? Black is a University of Missouri professor of economics and law and a former senior bank regulator.? His testimony at the hearing Wednesday on the subject of the Lehman Brothers failure has received considerable buzz.
The bombardment of salvos launched at the Fed, Treasury and SEC from the bearded, avuncular-looking professor during his opening statement before the Financial Services Committee rivals the unleashed allied forces onto the beaches of Normandy more than 65 years ago.
The era of war that ushered in the birth of Bretton Woods came full circle on Wednesday in Washington as the 58-year-old, learned, ex-bank regulator described the raw corruption, greed and systemic fraud, not necessarily referring only to the eye-popping example of a misguided mega-institutional failure the size of Lehman, but of the culture of slime and racketeering within the very institutions formed to protect citizens from the relentless Den of Thieves on the Street.? It took 65 years for the Bretton Woods system to fail for good, retirement age.
The indictment of the Fed, Treasury and the SEC isn’t new.? Others on "alternative media" have commented about this fall of the Roman Empire tale for quite some time.? But testimony before a formal Congressional body from an apparent man of honor with a background in banking regulation and a professorship to boot makes for a lovely set and setting for an enhanced scandal-junkie experience.
The dirty dealings leading to Lehman’s woes were self-inflicted, for sure, but encouraged and illicitly sanctioned by a list of regulators and the Fed, says Black, reveal the true root of the problem: no one is watching the store.? Talk of more or different regulation and cries for enforcement must have some good g! uys on o ne side of this cat-and-mouse arrangement to make the discussion worthwhile.? If there are no good guys, well, we can all start gathering bananas and bone up on Spanish.
It does appear that the United States has indeed degenerated to the major leagues of corruption on par with the Philippines, Angola, Congo, Argentina, Chile and Panama, to name just several.? The U.S. doesn’t look like the Philippines right now because the stored wealth of Americans hasn’t yet been completely looted.? Through the upcoming confiscatory tax increases, capital controls, rapid currency debasements, and withdrawals of foreign capital and investment from her shores, the U.S. will join the graveyard of past might.
Back to Professor Black:
"Lehman's underlying problem that doomed it was that it was insolvent because it made so many bad loans and investments. It hid its insolvency through the traditional means �C it refused to recognize its losses honestly," Black states in his report to Congress, entitled ‘Public Policy Issues Raised by the Report of the Lehman Bankruptcy Examiner.’ "It could not resolve its liquidity crisis because it was insolvent and its primary source of fictional accounting income collapsed with the collapse of the secondary market in nonprime loans. If Lehman sold its assets to get cash it would have to recognize these massive losses and report that it was insolvent. Investors knew that Lehman was grossly inflating its asset values, so they were generally unwilling buy stock in Lehman or acquire it."
Black says Lehman "refused to recognize its losses honestly."
Hasn’t this chicanery of deny, deny, deny accounting been sanctioned by the watchdogs and overseers by way of F.A.S.B. 157?? JPMorgan, Bank of America, Citigroup and Goldman all reported profits in the latest quarter clearly due to phony accounting of bogus tier-three asset valuations and other nonsense like booking trading profits and dow! nward ad justments to reserves for bad loans.? The scam has grown to include all the banks and broker-dealers with the change in the F.A.S.B. 157 rule.
Nothing has changed but the scope of the problem, which now has moved from the banks to the U.S. Treasury and its tag-team member, the Federal Reserve.? The Ponzi pyramid is now too big to leave to the banking system; the printing presses must be turned on full blast to cover the collapsed value of tens of trillions of dollars in destroyed synthetic paper assets in the scheme.
Black says that no one wanted to buy Lehman’s stock because of the fraud underlying the firm would eventually bust the company.? And we are now to believe that the Treasury consistently auctions mammoth amounts of debt with little to no deterioration in the bid to cover ratio��in an environment of deteriorated world trade.? Where is the extra demand for dollars coming from?? Either investors have sure gone stupid suddenly or the Fed somehow is expanding its balance sheet using foreign central banks and other surrogates to buy treasuries on the sly.? The meg-exporters haven’t been shipping much for at least a year now.? Where’s the new supply of savings for the Treasury to borrow (steal) from?
The transfer of terminally bad bank assets onto the public books is the last step before complete system failure.? The taxpayer is the mark of last resort to pay for the lender-of-last-resort’s balance sheet loans.? Now we know why George Soros said in Davos that "gold is the ultimate bubble." He bought tons of it in December.
And John Paulson, the manager of the largest hedge fund of the world, is so enthusiastic about gold and gold stocks, that he started another hedge fund dedicated to this investment.? And now we know why he’s so enthusiastic about the yellow metal; he’s been targeted by the SEC regarding his role in the Goldman fraud.? Paulson should have lots to say; he was a participant in the scheme, according to the SEC.? When we’! ;ve ente red the stage of co-conspirators turning on each other, there’s either an overcapacity of fraudsters in the scheme who now can be scapegoated, or we must be getting that much closer to the day of reckoning.
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